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[04:00:00] (COMMERCIAL BREAK)

ALISON KOSIK, CNN ANCHOR: Will a new chief of staff bring order back to the West Wing? A new era for the Trump administration when John Kelly is sworn in for his new role today.

DAVE BRIGGS, CNN ANCHOR: The president refusing to go on quietly on health care after a major rebuke in the Senate. He's suggesting sweeping changes which could have a big impact on insurance for millions of low-income Americans.

KOSIK: A violent election day in Venezuela. The Maduro regime now celebrating a result global observers are saying could make him the next dictator. And that's not the only trouble overseas this morning. We have reporters on all our top stories, from the White House, Caracas, Moscow and Beijing.

Good morning and welcome to EARLY START. Alison Kosik sitting in for Christine Romans.

BRIGGS: Good morning too. I'm Dave Briggs. It is Monday, July 31st, 4:00 a.m. in the East.

A lot going on around the world. We begin right here with President Trump's new chief of staff, front and center at the White House, General John Kelly assumes the position after another chaotic week in the Trump White House.

Kelly will be sworn in at 9:30 a.m. this morning. The retired Marine Corps general will be enlisted with trying to restore order to a White House that appears to lack direction and discipline.

KOSIK: That's probably not going to be an easy task and both sides of the aisle are cautiously optimistic.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D-CA), MINORITY LEADER: I look forward to working with General Kelly.

SEN. SUSAN COLLINS (R), MAINE: I do think that General Kelly will do a good job as the White House chief of staff. I think he will bring some order and discipline to the West Wing.

SEN RICHARD BLUMENTHAL (D), CONNECTICUT: If anybody can bring order and discipline to this White House, it is General Kelly.

REP. MARK SANFORD (R), SOUTH CAROLINA: I think that in terms of a great leadership component, the White House needs General Kelly representing it.

(END VIDEO CLIP)

KOSIK: A big early challenge for Kelly concerns chain of command issues. Who reports to whom, that's still unclear. Typically senior advisers report to the chief of staff. And as we know, this is not your typical White House by any stretch of the imagination.

BRIGGS: No. A senior administration official tells CNN Kelly has been given full authority. The president tapped General Kelly who is serving as Homeland Security Secretary to replace Reince Priebus who resigned last week.

KOSIK: OK, so John Kelly's swearing in today is going to be followed by a cabinet meeting putting President Trump and Attorney General Jeff Sessions in the same room for the first time since the president began a barrage of public criticism aimed at his A.G. With the leadership spot at Homeland Security now vacant, there are rumors flying around that the president could move Sessions there and install a new attorney general who would fire Special Counsel Robert Mueller.

BRIGGS: The Trump team said to be weighing all its options. Jeff Sessions has been in hot water with the president since recusing himself from the investigation into Russia's meddling in the 2016 election and possible collusion with the Trump campaign. Lawmakers on both sides of the aisle have warned against firing Sessions. Homeland Security secretary is a senate-confirmed position with responsibilities that include the construction of the border wall and implementation of the Trump travel ban.

KOSIK: Even after Senate Republicans failed to repeal Obamacare, President Trump refusing to give up the fight. The president goading lawmakers to keep trying to pass a health care bill in a series of tweets this weekend including this one, "Unless the Republican senators are total quitters, repeal and replace is not dead. Demand another vote before voting on any other bill."

BRIGGS: Several GOP senators are calling for return to the committee process to craft legislation. Among them, Maine Senator Susan Collins who voted no on last week's repeal bill, and Arizona's Jeff Flake who voted yes. But the Trump administration may already be looking for ways to undercut Obamacare. Health Secretary Tom Price was asked about the individual mandate on ABC's "This Week."

(BEGIN VIDEO CLIP)

MARTHA RADDATZ, ABC NEWS HOST: What about the individual mandate? Is the president considering directing his agencies not to enforce it? Have you ruled that out? TOM PRICE, SECRETARY OF HEALTH AND HUMAN SERVICES: The individual

mandate is one of those things that actually is driving up the costs for the American people in terms of coverage. So what we're trying to do is make it so that Obamacare is no longer harming the patients of this land, no longer driving up costs, no longer making it so they've got coverage but no care. And the individual mandate is one of those things. All things are on the table to try to help patients.

(END VIDEO CLIP)

BRIGGS: The president also making some threats that could have a big impact on the insurance market. We get more from CNN's Athena Jones at the White House.

ATHENA JONES, CNN WHITE HOUSE CORRESPONDENT: Good morning Dave. The president is keeping the pressure on senate Republicans to continue working on efforts to repeal and replace Obamacare. He tweeted about this numerous times over the weekend. Some of the tweets that got the most attention came on Saturday, the president issuing what many viewed as a pair of threats, writing, "If a new health care bill is not approved quickly, bailouts for insurance companies and bailouts for members of Congress will end very soon."

[04:05:11] And that the president is referring to two things here. One is this idea of ending the employer contributions for health insurance for members of Congress. That's the contribution that lawmakers get from the federal government.

The other point he makes has to do with the cost-sharing subsidies that help lower deductibles and co-pays for some seven million lower income people across the country. That is a threat that has drawn ire from both sides of the aisle. Maine GOP Senator Susan Collins took issue with the word "bailout," and argued that getting rid of the subsidies which insurance companies rely on would hurt the most vulnerable people in communities across the country.

(BEGIN VIDEO CLIP)

COLLINS: It really would be detrimental to some of the most vulnerable citizens if those payments were cut off. They're paid to the insurance companies, but the people that they benefit are people who make between 100 percent and 250 percent of the poverty rate. So we're talking about low-income Americans who would be devastated if those payments were cut off.

(END VIDE CLIP)

JONES: White House counselor Kellyanne Conway said on "Fox News Sunday" that the president will be making a decision about whether to continue these cost-sharing subsidies which right now are being paid out on a month-to-month basis. A decision on that will be made at some point this week. Back to you.

KOSIK: All right, Athena Jones thanks for that.

And more on healthcare now. Insurers have until August 16th to set Obamacare rates for 2018. And the president's threat to cut off subsidies could mean higher premiums. So insurers are working in the sea of uncertainty which they hate and they rely now on $8 billion in cost-sharing subsidies to help pay for low-income Americans.

So what's happening is carriers, they've already requested big rate hikes for next year to offset the expected costs. And keep in mind, almost half of the companies they plan to increase premiums by 20 percent or more. Meantime, other insurers, they're exiting the exchanges completely. Big names like Aetna, Humana and Anthem, in fact 25,000 people in three states, they are at risk of having no option for an Obamacare insurer next year unless an insurer goes ahead and steps in. This is while an additional 2.7 million Americans could have just one option, one insurance carrier to choose from, which means no choice.

Insurers say they want to work with the administration to fix Obamacare but Washington's actions so far have fueled instability. Besides threatening cost-sharing subsidies, you know, the White House hasn't committed to enforcing the individual mandate. And that one is key to getting those younger, healthier people to enroll, offsetting the costs for more expensive customers. But then again the problem is that even with Obamacare the way it is, the younger folks are not joining in the pool. That's quite the problem.

BRIGGS: Right. And no real clear path forward for Mitch McConnell. Time will tell. All right, the law enforcement community offering some pretty aggressive push back to President Trump's statement encouraging police officers to be "rough" with the people they arrest.

Police officials saying it sends the wrong message at a time of heightened tensions with the public. The president's remarks coming in a law and order speech last week in a New York suburb directed at cracking down on violent street gangs.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: When you see these thugs being thrown into the back of a paddy wagon, you just see them thrown in, rough, I said please don't be too nice. Like when you guys put somebody in the car and you're protecting their head, you know, the way you put the hand over -- like don't hit their head and they've just killed somebody, don't hit their head. I'd say you can take the hand away, OK?

(LAUGHTER)

(APPLAUSE)

(END VIDEO CLIP)

KOSIK: OK. Despite the applause you just heard, police in Suffolk County where the president spoke, they say they have strict rules and procedures and will not tolerate roughing up prisoners. Police departments in New York City, Boston, and Los Angeles among others also criticizing the president's message. BRIGGS: All right, ahead, new trouble from a trio of global

adversaries. Russia retaliates for sanctions, North Korea threatens the same, and Venezuela in chaos after an election being called an affront to democracy. We're live in all three next on EARLY START.

[04:10:00] (COMMERCIAL BREAK)

BRIGGS: Welcome back. In an apparent retaliation for the sanctions bill just passed by Congress, Russian President Vladimir Putin now confirming the staff at U.S. diplomatic missions in Russia will be cut dramatically by more than 700. That includes both diplomats and technical workers. The State Department says the move is "regrettable and uncalled for." Officials are assessing the impact and a possible response.

Let's bring in CNN Clare Sebastian. She's live in Moscow this morning. Good morning, Clare.

CLARE SEBASTIAN, CNN INTERNATIONAL CORRESPONDENT: Yes, good morning, Dave. The Russian President Vladimir Putin on state TV last night saying that he wants to cut the U.S. diplomatic mission in Russia by 755 people. Now the Russian's justification for that is that that would bring the total number of U.S. diplomatic personnel in Russia down to 455 people which it says is the same number of Russian diplomatic personnel that are currently in the United States.

And this apparently levels the playing field. But Russia has said that this is a direct response to what the Obama administration did back in December where it also confiscated two diplomatic compounds. Something Russia has also done this time and expelled 35 diplomats. Well on the face of it, 35 a significantly smaller number than 755, is what Russia is doing. But having said that, this is not just diplomats, this is technical personnel, as well and it may also include Russian staff that the U.S. diplomatic mission employs in this country.

[04:15:04] Now the clinching factor for President Putin was the passage through Congress of that bill authorizing new sanctions on and tying the president's hand from potentially lifting or relaxing previous sanctions. He said that was an unprovoked move by the U.S. to worsen relations with Russia, and that this is what brought him to this point. Take a listen.

(BEGIN VIDEO CLIP)

VLADIMIR PUTIN, PRESIDENT OF RUSSIA (through translator): We waited a long time for things to perhaps change for the better. We had such hope that the situation would change, but judging by the situation, that will not be soon.

(END VIDEO CLIP)

SEBASTIAN: Now, also not bringing the sides any closer together, Vice President Mike Pence currently in Estonia, part of a trip to reassure various countries Estonia, Georgia, and Montenegro, the U.S. alliance in the face of Russian aggression. He said Sunday in Estonia that the U.S. expects Russian behavior to change. Russia, for its part, says it doesn't do anything under pressure. So this impasse, Dave, appears to be pretty entrenched.

BRIGGS: Yes. And as for that sanctions bill, the president yet to sign, it could happen as early as today. Clare Sebastian live for us in Moscow. Thank you.

KOSIK: The U.S. and Japan agreeing to take further action against North Korea, Prime Minister Shinzo Abe and President Trump speaking by phone Sunday, just days after North Korea's latest missile launch. The two leaders discussing increased economic and diplomatic pressure on the Kim Jong-Un regime. But that will require help from China, the target of a nasty Trump tweet storm that happened late last week.

CNN's Will Ripley is live for us from Beijing with the latest developments. You know, we've watched, Will, the president really try to put a lot of pressure on China to take extra steps to put pressure on North Korea. It doesn't seem to be working thus far.

WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT: And now President Trump seems to be fed up, tweeting that China has done nothing to rein in North Korea, implying that there could be trade consequences as a result of this. China, just within the last few hours, warning the U.S. not to conflate the trade issue with the North Korean issue because a trade war between the U.S. and China would be bad on a whole different level, not even factoring in the North Korea situation which continues to escalate.

President Trump and the Japanese prime minister speaking on the phone, addressing what they call a grave and growing threat, promising to work together to take further action without really specifying what else they can do beyond the sanctions, the economic pressure, and the diplomatic pressure that they're already putting on Pyongyang. Really the U.S., Japan, South Korea have limited options without the cooperation of China, and to a lesser extent, Russia, which continue to trade very heavily with North Korea.

But over the weekend, Chinese President Xi Jinping, who staged a massive military parade in Inner Mongolia, gave a speech after those Trump tweets. He didn't even mention President Trump and he didn't mention North Korea. But he did say that in these tense times, China will continue to beef up its military arsenal.

They put on display brand new stealth fighter jets, and also their own nuclear-capable ICBMs. And then of course you have North Korea which unveiled its latest ICBM, which experts say now puts much of the mainland U.S. from the West Coast, Los Angeles to Denver, even Chicago within striking range. And analysts saying by early 2018, they could have an ICBM that could hit pretty much anywhere in the mainland U.S. But right now, the U.S. and China seem to be drifting further apart on this issue, not coming closer together about how to solve it, Alison.

KOSIK: And China nervous to make any action -- to take any action against North Korea not just because of the nuclear issue but because of the economic upheaval and how that could affect China. All right, CNN's Will Ripley live for us from Beijing. Thanks.

BRIGGS: OK, Venezuelan president Nicolas Maduro declaring victory in a controversial election widely regarded as a fraud and a vehicle to rewrite the constitution to consolidate Maduro's power. Government officials in Caracas claiming a voter turnout of over 41 percent. Maduro's opponents calling that figure pure fiction. The violence on Sunday very real. We do want to caution you the video we're about to show you is disturbing.

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KOSIK: One police officer caught on fire from that explosion. Election Day clashes between protesters and police claiming at least ten more lives on Sunday. The death toll since early April now sitting at 125. The State Department condemning the election, insisting the U.S. will continue to take strong and swift actions against the Maduro regime.

Let's get the latest from CNN's Leyla Santiago. She's live for us in Caracas. You know, we see the outcome of this election in Maduro's favor. What is the sentiment there at this hour?

[04:20:00] LEYLA SANTIAGO, CNN CORRESPONDENT: There's a lot of uncertainty for what's to come. A lot of people telling me as I was on the ground yesterday that they want peace and I'm talking about people on both sides. But you know, if yesterday, if this week is an indication of what's to come, it maybe a while before Venezuela sees the peace that so many desire. As the numbers came out or as the president spoke about the numbers, the results of the elections last night, you know, he called it a victory. He called voters brave.

The opposition calling this a fraud. More than 19 million people were registered to vote, eligible to vote, and they are saying that more than eight million actually showed up and supported this new assembly that could rewrite the constitution. You compare that to the numbers from just a few weeks ago as the opposition held a referendum to see if this country actually even wanted this new assembly, and they claim that they had more than seven million votes.

So really, the government is saying that this is victory but the opposition not backing down. As I was on the streets yesterday for the protests, we were there as protesters took to the streets. And the National Guard came in and there was quite the clash. You know, you really aren't seeing them back down just yet. But they will admit, and by they I'm talking about the opposition -- they're tired.

You're talking about months and months of violence, of political unrest. And they will tell you we're tired. The frustration is growing but we are not backing down because do not want a new assembly. We want a new government.

KOSIK: You know, Leyla, the outcome of this election was pretty much a foregone conclusion that this result would be it. Everybody kind of knew it before the day even began. What kind of hope are you getting from maybe the opposition that the Trump administration may impose sanctions on the Venezuelan government?

SANTIAGO: You know, last night we saw quite a few countries beyond the United States. The United States included, really putting that pressure, saying we are not going to legitimize this vote. People here, the opposition here, is really hoping that that international pressure plays a role in the change that they're looking for. And listen, when we talk about the change they want, they see the crisis as the food and medical shortages.

I have seen people on the streets digging through trash. One woman very excited when she was able to find a jar of chocolate that she could just scrape and eat because that was all she would be eating today. I've talked to cancer patients who need medical supplies and aren't able to get even just acetaminophen to deal with the pain that comes with such a horrible disease, such a horrible illness.

So, when you talk about crisis and the desire for change, that is what the opposition is talking about. And they're hoping that the United States, that Colombia, that Mexico, just a few of the countries that have spoken out and taken their side, will add to that -- what could be possible change in the future.

And that desire for change had certainly been coming for a long, long time there. All right, Thanks so much. Leyla Santiago live for us in Caracas.

BRIGGS: Just a heartbreaking situation there indeed. All right, breaking overnight, a brazen prison break in Alabama. A dozen inmates managed to break free. How many are still on the run? That's next.

[04:25:00] (COMMERCIAL BEAK)

KOSIK: Breaking overnight, two inmates are still at large after escaping from an Alabama jail. The Walker County sheriff's office says a dozen inmates originally busted out of the walker county jail Sunday night. Ten have since been captured. One of the two still on the loose was being held on attempted murder charges. Authorities say it's not clear how they made their escape.

BRIGGS: Rides at the Ohio State Fair have reopened after being reinspected. All were shut down Wednesday when the 40-foot-high Fireball ride broke apart, tragically killing 18-year-old Tyler Jarrell and injuring seven others. Jarrell's family has hired an attorney to possibly pursue a wrongful death lawsuit.

The Dutch manufacturer that makes the Fireballs ordered all shut down worldwide. The owner of the company that provides rides at the Ohio State Fair believes the accident was caused by a mechanical malfunction.

KOSIK: OK, I want to show you something. Look at this picture capturing a ground worker at Nice airport in France punching a complaining passenger in the face while the man is holding an infant in his arms. Flight 2122 from Nice to London had already been delayed 11 hours on Sunday when this happened. The passenger was taken from the scene but did board the plane with a mark on his face when it eventually took off. An airport spokesman says the employee who threw the punch was a subcontractor. The company he works for has suspended him. I mean, come on! BRIGGS: A left cross. A little brutal. OK, Chris Christie may want to

consider avoiding beaches and ballparks. Take a look at the New Jersey governor at a ball game in Milwaukee getting in the face of a heckling fan. Mind you without spilling a single nacho. Notice the cradling action of the governor uses to protect that bowl.

Christie was in Milwaukee over the weekend visiting his son who works for the Brewers. In case you were wondering, he told the heckling fan, you're a real big shot. The fan replied, "I appreciate that." Here's a little preview of the governor's sports talk radio show that could be coming to the New York area.